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LVR limits set to return

The Reserve Bank plans to reintroduce loan to value ratio restrictions on mortgage borrowers from March next year following a surge in the housing market.

Wednesday, November 11th 2020, 8:36AM 1 Comment

In an announcement this morning, the Reserve Bank said it would begin a consultation next month about re-instating LVR restrictions on high-risk lending.

LVR restrictions were scrapped in May for one year, yet the RBNZ appears to be performing a U-turn, amid record growth in house prices.

If LVRs return, they would kick in again from March 1, 2021, the central bank said.

The restrictions were removed in the wake of the pandemic to stimulate lending and help borrowers who deferred mortgage payments and accumulated extra interest on their loans. 

The RBNZ said a rise in "higher-risk investor lending" prompted its decision. 

It is unclear whether LVRs will return just for investors.

RBNZ deputy governor Geoff Bascand said "circumstances in the lending market have since improved and we are now observing rapid growth in higher-risk investor lending. We will consult about re-instating the restrictions we had in place pre-Covid, which limited the amount of high-risk lending that banks could make."

The RBNZ will reveal more about the consultation when it publishes its latest Financial Stability Report later this month.

Westpac economist Dominick Stephens said: "We interpret this combination of announcements as the RBNZ starting to address the widespread concern that its low interest rate policy is boosting house prices more than other parts of the economy."

 

Tags: LVR RBNZ Reserve Bank

« What is the Reserve Bank's new plan to cut interest rates?Bank capital rules delayed until 2022 »

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Comments from our readers

On 11 November 2020 at 2:29 pm Amused said:
What is this Reserve Bank Governor doing? What's the best way to throw petrol on a housing market fire? By giving advance notice now that the LVR restrictions for investors (hopefully not owner occupiers) will be more restrictive in 5 months' time. This should be implemented immediately not in March next year just like when the LVR restrictions were relaxed back in April.

Why must we always go through a “consultation process” at the Reserve Bank to make changes whenever they have to make a U-turn on policy? Wombles!


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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.09 3.25 3.39
ANZ Special - 2.49 2.69 2.79
ASB Bank 4.45 2.49 2.59 2.65
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.49 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.09 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 ▼2.45 ▼2.65
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.99 ▼3.09 ▼3.15
SBS Bank Special - 2.49 ▼2.59 ▼2.65
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.69 2.79
The Co-operative Bank - Standard 4.40 2.99 3.19 3.29
TSB Bank 5.34 3.29 3.29 3.59
TSB Special 4.54 2.49 2.49 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.49 2.69 2.79
Median 4.55 2.94 3.07 2.80

Last updated: 27 November 2020 3:57pm

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